How much will it cost to refinance my home loan?

Refinancing your current loan could save you hundreds on your monthly repayments.

With interest rates at all time lows, it makes sense to look into your options and compare how your current home loan stacks up against the competition.

We tend to find that most people are either too busy to check their current loan, or they think that switching banks will cost them a pretty penny.

The real question is whether the costs of refinancing outweigh the benefits.

But that’s why we’re here.

The table below is an example that shows the typical costs you could face depending on your situation

 

Expense Type

Cost

Loan Exit Costs  

Current lender discharge fee

$100 - $300

Legal fees

$0 - $200

Government Charges

 

Mortgage de-registration fee (old loan)

$160 -WA (differs for each state)

Mortgage registration fee (new loan)

$160 -WA (differs for each state)

New Loan

 

Title Search Fee

$30

Establishment Fee

$0 - 300

Legal Fee

$0 - 200

Settlement Fee

$0 - $100

Total refinancing costs

$450 - $1,450


How to accurately compare one loan with another

There are several costs to consider when refinancing your home loan, and these can be split into three groups.  

  • the fees your bank will charge you for closing your current loan,
  • those that the new bank will charge for establishing a new home loan, and
  • government fees 

The fees your current bank may charge to exit the loan might include a mortgage discharge preparation fee, and a legal fee to draw up the appropriate paperwork.

These will differ from lender to lender and loan to loan.  However you should be able to find some of these in your loan contract under exit fees.

While you should find a set figure for the exit fee, the discharge preparation fee will generally be determined when you request a quote to refinance.  This is because as most loans are taken over a long period of time and administration costs will generally fluctuate over the loans lifetime.

A simple phone call

The easiest way to find out exactly what the cost will be is to give your current bank a call.  

Generally they will try everything to keep you on board, and ask what other offers you have.

Don’t let them give you the run around, and ask directly for what the payout cost, including fees, would be to refinance your home loan.

Armed with this figure you will know exactly what the payout figure and costs are.  

Then you can make an accurate comparison, or if you contact me on 0402 252 150, they can compare hundreds of home loans with accuracy to see if you can make any savings.

Saving on establishing a new loan

Once you have a solid figure showing how much it will cost to exit the current loan, you can look at savings that can be made on a new loan.

Areas where you can make savings on a new loan include;

  • a reduction or waiver of the establishment fee,

  • no ongoing loan service fees,

  • low or no legal and settlement fees,

  • a lower interest rate than your current loan

You’d be surprised the impact a small reduction on each of these factors can mean for your monthly repayments.

Costs you can’t avoid

Unfortunately there are some costs that can’t be avoided in the refinancing process, and these are the government charges.

The government will impose a charge to firstly deregister your current mortgage and then to register the new mortgage.  

In Western Australia the mortgage is registered with Landgate, and the fee covers the deregistration of the old mortgage, and registration of the new one.

This fee will differ from state to state.

Make sure the savings last

When looking at refinancing you need to make sure that the savings are for the long term.

Many banks will offer an introductory rate, which can be very low, but this then reverts to a higher rate after a set period.  

While these types of loans can provide great savings in the short term, you often end up paying more over the life of the loan.

Does it make sense to refinance

The main thing to remember when looking at your options is to make sure everything adds up.

If you are going it alone, make sure you find a good set of loan calculators, find out your exact repayment figure including costs from your bank, and then add in all the costs to establish a new loan.

If you want a local home loan expert to cast their eyes over your sums and make sure everything is right, give Peter Hale a call from Mortgage Choice in Central suburbs on 0402 252 150, or send through an email with your questions to peter.hale@mortgagechoice.com.au.

With access to hundreds of loans to compare we can tell you the costs for each loan, how to avoid paying too much and if switching is the right thing for you.

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Posted in: Refinancing

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